Recently, China's consumer market has shown clear signs of recovery, with the total retail sales of consumer goods in September increasing by 3.2% year-on-year. Driven by the "trade-in" policy, sectors such as home appliances and automobiles have seen significant growth. Consumption data during the National Day holiday also showed a significant improvement, with domestic travel and consumer spending returning to the levels of 2019. Along with the stabilization of the macroeconomy and the implementation of more measures to stabilize growth and promote consumption, the turning point for consumption growth in China during this economic cycle may have already emerged.

The total retail sales of consumer goods announced in September rose year-on-year, and some high-frequency data since the beginning of October further indicate that China's consumption growth has started to rebound recently. The policy support for "trade-in," as well as the increased counter-cyclical adjustment efforts of monetary and fiscal policies, may both be driving factors for the current upward trend in consumption growth. Along with the stabilization of the macroeconomy and the implementation of more measures to stabilize growth and promote consumption, the turning point for consumption growth in China during this economic cycle may have already emerged.

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Recent consumption data has significantly improved.

Looking at the economic data announced in September, the total retail sales of consumer goods rebounded significantly from 2.1% in August to 3.2% year-on-year. Among the categories of consumer goods with a limit above, those closely related to "trade-in" such as home appliance sales increased by 20.5% year-on-year, office supplies by 10.0%, automobiles by 0.4%, and furniture by 0.4%, all showing significant improvement compared to the previous months.

Since the beginning of October, a series of high-frequency data related to consumption has continued to improve. On the one hand, consumption data during the National Day holiday was pleasing. Domestic travel reached 765 million trips, a 10.2% increase compared to the same period in 2019, and a further recovery compared to the Mid-Autumn Festival; the total spending by domestic tourists was 700.817 billion yuan, a 7.9% increase compared to the same period in 2019, basically returning to the level of 2019. The total cross-regional personnel flow in society reached 2.003 billion trips, a 23.1% increase compared to the same period in 2019, also showing a further recovery compared to the Mid-Autumn Festival.

On the other hand, high-frequency data for automobile and real estate sales also significantly improved compared to last month. Data from the Passenger Car Association shows that from October 1st to 13th, the retail market for passenger cars was 823,000 units, a year-on-year increase of 20% (a 2% increase in September), with new energy vehicles increasing by 64% year-on-year. From October 1st to 17th, the transaction area of new houses in 30 major cities narrowed to a year-on-year decrease of 5.3% (a 32.4% decrease in September), with first-tier cities returning to positive growth. Generally speaking, the recovery in real estate sales will slightly lag behind, driving the growth of sales in furniture, home appliances, and decoration materials after a few months.

Policy efforts promote the rebound of consumption growth.

The recent rebound in the growth rate of various consumption data is not accidental, but the result of the joint promotion of factors such as the "trade-in" policy and the further strengthening of the counter-cyclical adjustment of overall monetary and fiscal policies.

Firstly, the support of the "trade-in" policy for China's commodity consumption cannot be ignored. At the beginning of March, many places introduced policy measures for car replacement updates and home appliance trade-ins. On July 25th, the intensity, scope, and standards of financial subsidies were significantly upgraded. Among them, the central government used ultra-long-term special treasury bonds to add 150 billion yuan of financial subsidies for the trade-in of consumer goods; the National Development and Reform Commission and the Ministry of Commerce previously stated that the funds were allocated to localities at the beginning of August. Currently, it appears that the effects of policy stimulation are clearly evident in the September data.

Secondly, since late September, the central government has further launched a policy combination, and a new round of favorable policies for stabilizing the stock market, real estate market, and growth have been introduced one after another, leading to a significant rebound in the stock market. The wealth effect, combined with the improvement of expectations for the economic outlook, has also driven the warming of various consumption data.The Politburo meeting discussed the economic situation in advance in September and made deployments, clearly proposing that fiscal and monetary policies should strengthen counter-cyclical adjustments. The People's Bank of China immediately lowered reserve requirements and interest rates, and stated that it would take further action before the end of the year; the Ministry of Finance also announced that it would significantly increase debt limits, resolve local hidden debts, provide more space for local government expenditures, and the central government's further leverage options are also under consideration. The People's Bank of China and the Ministry of Housing and Urban-Rural Development, among other relevant departments, have also announced a series of measures to promote the "stabilization" of the real estate market and support the capital market. Since late September, the A-share and Hong Kong stock markets have shown strong performance, both experiencing significant rebounds; domestic and foreign investors and consumers' expectations and confidence in China's economic prospects have also significantly improved. These factors have all played a supporting role in consumption.

Finally, some local initiatives to promote consumption have also contributed to the improvement of consumption data. For example, to implement the central and Shanghai municipal government's policies to promote service consumption, the Shanghai municipal government reviewed and passed the "Shanghai Service Consumption Voucher Issuance Plan" in September, deciding to issue "Le·Shanghai" service consumption vouchers in four areas: catering, accommodation, movies, and sports. Information from the Shanghai Municipal Development and Reform Commission shows that the municipal financial funds invested 500 million yuan, allocated according to the consumption proportion of each field and the needs of the citizens, with 360 million yuan for catering, 90 million yuan for accommodation, 30 million yuan for movies, and 20 million yuan for sports. It will be issued in two stages, the first stage starting from September 28, and the second stage from November to the end of December. In addition, Guangzhou also issued 3 billion yuan in consumption vouchers, and places like Beijing Tongzhou also issued consumption vouchers for automotive consumer goods in October.

China's consumption inflection point may have already emerged.

In fact, in addition to consumption, some other economic data in September, especially some economic data representing the total volume such as industrial production and power generation growth rates, are also rebounding, showing that under the influence of policy promotion and other factors, the economic growth rate may have already reached an inflection point, and the GDP growth rate in the fourth quarter is expected to rebound.

Furthermore, it is expected that future fiscal, monetary, and real estate-related favorable policies will still be implemented, especially the central government's leverage arrangements are very much worth looking forward to and should further stimulate consumption.

With the further implementation of policies and the improvement of the economic fundamentals, residents' income will also rebound, coupled with the wealth effect brought by the rebound of the stock market and the stabilization of the real estate market, China's consumption inflection point may have already emerged.